Labor cost is the direct cost that plays a fundamental role while estimating the total project cost. Many estimators are unaware of the right way on how to estimate labor costs for house construction. You can check out this basic guide that has mentioned all nitty-gritty details.
Remember that labor costs include hiring masons, carpenters, excavators, electricians, plumbers, painters and other workers meant for the respective task. The significance of understanding and accurately estimating labor costs has always been talked about. The estimation manager from renowned construction estimating firm QTO Estimating says that “If you want to submit a convincing and profitable bid, you must know how this cost is calculated. The labor costs should be estimated carefully too as many contractors focus mostly on the material costs estimation.”
How to Calculate the Labor Cost
Three methods are there that are generally used to compute the labor cost and their details are mentioned-below:
Unit Pricing Method
The unit pricing method seems to be an ideal method for accurately calculating the labor cost. Moreover, the use of this method is common when doing bid or project design estimates. In this technique, you multiply the hourly rate by the time which is required to complete one unit. For example, labor needed to build a wall charges $40 per hour. If it is 12 hours of work, the total cost will be $480.
Square Foot Method
The next one is the square foot method! This technique offers many strategic benefits and is recommended by top-notch contractors. At times, it is called the budget tool method. If following this method, you must get help from a historical date and base your cost estimates on it. More data you have, the easier it will be for you to come up with accurate future budget estimates.
Rule of Two Method
This one is a basic labor cost formula that you can opt for! We know that labor costs comprise 45 to 50% of the total project budget. Just multiple this number by two and afterwards, add 10 to 15% for contingency. You can take help from the construction labor database to know the average labor cost.
Which Factors Determine the Labor Cost?
The prime factors that determine the total labor cost are:
- Per day wage, payroll taxes, overtime pay and other benefits.
- The cost varies from region to region. Workers from two different countries will charge varyingly although they have been assigned the same project.
- The standard of living, weather conditions, complexity of the project and other factors play an important role in determining the labor cost.
The Cost of Hiring
Labor hiring is a time-consuming process and this involves cost at the same time. When estimating the total labor cost, make sure to include the cost of hiring as well as onboarding. Determine how much time and resources you have invested to choose the right candidate.
The Time Limit to Complete the Project
If you have a short time and you want to complete the project quickly, labor will charge more. Speedy construction leads to accelerated working, but requires more labor and overtime payment which increase the total labor cost.
Complexity Level of the Project
Labor will charge more if the geometry and structure of the building looks complex to construct. The shape, size as well as complexity greatly influence the labor cost. Buildings with simple floor plans and elevations have a low labor rate than curved or angular-shaped buildings.
The Location and Physical Site Conditions
The location and physical site conditions decide the final labor cost. If the site needs excavation, demolition, clean up services, the labor charges will definitely go up. Furthermore, sloped sites comparatively demand more work. The accessibility of the location can influence labor costs. Remote or difficult-to-reach sites may require special transportation or equipment, adding to the overall cost. Weather conditions can also play a significant role; for instance, construction in wet or cold climates may demand specific protective gear or extra measures to ensure the safety and productivity of workers. Hence, location and site conditions entail more considerations than just the physical layout of the land.
The Experience
Labor rate differs when choosing between a beginner-level and certified labor. The more experienced the labor is, the more his asking price will be! It is believed that competitive labor forces never compromise on quality, deliver the best results and showcase excellent craftsmanship, which is why hiring experienced labor forces must remain your top priority.
The Budget
Lastly, it even depends on your budget that labor of what caliber you can afford! If money is not an issue, you can hire the most capable labor force for your construction project. However, if you are running short off money, you can hire a labor force which is fresh and their asking price is also low.
Thus, that is how to compute the labor cost precisely and accurately. One of the primary reasons that you often lose bids is that you do not give dedicated time to create error-free estimates. Traditional methods lack accuracy, so opt for the advanced methods and bring more accurateness to your estimates. Stay tuned!
Bottom Line
Labor costs are an integral component of the total project expenditure in house construction, demanding careful consideration and precision in estimation. The three outlined methods, namely Unit Pricing, Square Foot, and Rule of Two, provide different approaches to effective labor cost calculation, each with its unique strategic benefits. Moreover, labor costs are influenced by a multitude of factors such as wages, project complexity, geographical location, and the laborer’s experience, among others.
Hence, an accurate estimation requires consideration of these aspects, alongside the physical site conditions, project timeline, and labor hiring costs. The process is particularly essential in presenting a compelling and profitable bid and in avoiding budgetary oversights. The labor market is dynamic, and maintaining competitiveness necessitates a continuous review and update of estimating methods to ensure they meet the changing demands and complexities of construction projects.
